Vertical integration & prescription incentives in healthcare: the effects of doctors´ offices adjacent to private pharmacies in Mexico

Abstract

After the 2010 regulation to antibiotics sales, a new provider of ambulatory healthcare grew across Mexico: Doctors’ Offices Adjacent to Private Pharmacies (DAPPs). This new model implies the integration of prescription and dispensation of medications, which generates financial incentives to benefit from the information asymmetry that impedes the patient to identify the quality and efficiency of the service. Consequently, this allows the physician to induce a higher consumption of medications. Despite this, regulation and economic competition authorities have not analysed the effects that DAPPs have on the consumption of medication neither on the healthcare market’s structure. This work analyses empirically the effects that DAPPs have on medications consumption in Mexico with data from the Nutrition and Health National Survey (ENSANUT) 2012. The main results evidence an increase in a physician’s likelihood to prescribe one or more medications to a patient in 43 points. These results support the hypothesis that DAPPs’ financial incentives modify physicians’ prescription patterns for their own benefit without considering the damage to patients’ wellbeing.